WaMu Approved to Seek Creditor Vote on $7 Billion Plan
Washington Mutual Inc. (WAMUQ), the former owner of the biggest U.S. bank to fail, won court approval to send its latest $7 billion payment plan to creditors for a vote.
U.S. Bankruptcy Judge Mary Walrath in Wilmington, Delaware, ruled that the company’s so-called disclosure statement contained enough information for the creditors to vote.
The decision comes after Walrath refused to halt consideration of the plan until a district court rules on an appeal by the holders of so-called trust-preferred securities. Those investors, including Black Horse Capital LP and Lonestar Partners LP, last year lost their court battle to have Walrath define their securities as debt instead of equity.
“The harm to all the other creditors and stakeholders in the case, I think, would be enormous,” Walrath said in a hearing today.
Washington Mutual is preparing to try for the third time to win approval of its plan after settling the objections of its main critics, including shareholders.
The company will submit a written order for Walrath to sign approving the disclosure statement after making minor wording changes, Brian Rosen, a WaMu attorney, said in court.
Tax Benefits
The company will return to court on Feb. 16 to seek approval of the plan, which would pay creditors $7 billion and set up a small reinsurance company to take advantages of tax benefits WaMu built up before it filed bankruptcy in 2008.
Last month WaMu and the hedge funds backing the payment plan settled a dispute with a committee of shareholders, one of the last major opponents of the proposal.
That agreement, brokered by a court-appointed mediator, calls for noteholders to contribute $75 million to the only unit of WaMu that will exit bankruptcy as well as loan the entity $125 million.
The company also settled a fight with a group of creditors who hold so-called litigation tracking warrants, the value of which was tied to a lawsuit WaMu won against the U.S. government. Those warrant holders will get $9 million and shares of the reinsurance unit that would survive bankruptcy under the plan.
Year of Battles
The settlements follow more than a year of battles among shareholders, four hedge funds that hold billions of dollars in WaMu notes, and the company. Twice WaMu failed to win approval from a bankruptcy judge for previous versions of its reorganization plan, partly because of opposition from shareholders.
The trust-preferred investors who wanted to halt consideration of the plan hold about $1.5 billion in convertible debt that Walrath ruled became shares in WaMu when the company filed bankruptcy in 2008. Shareholders will collect a fraction of what debt holders will collect under WaMu’s proposed payout plan.
WaMu, based in Seattle, filed for bankruptcy on Sept. 26, 2008, the day after its banking unit was taken over by regulators and sold to JPMorgan (JPM) Chase & Co. for $1.9 billion. Washington Mutual Bank had more than 2,200 branches and $188 billion in deposits.
The case is In re Washington Mutual Inc. (WM), 08-12229, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net
To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.
Rate this Page